Telkom CEO Resigns as Company Struggles to Raise Capital

Telkom SA fell to its lowest in more
than a month as Chief Executive Officer Nombulelo Moholi
resigned amid a struggle to raise capital necessary to expand
into broadband and mobile services.

Shares in the Pretoria-based company dropped as much as 3.8
percent and closed 3.1 percent lower at 17.61 rand in
Johannesburg, the lowest level since Oct. 1. About 2.4 million
shares changed hands, or 172 percent of the daily average for
the past three months.

Moholi, an engineer with 24 years of experience in the
telecommunications industry, will become the fifth CEO to leave
Africa’s largest fixed-line operator in the past eight years.
She has given the company six months notice of her intention to
quit before her contract expires, Telkom said without giving a
reason for her departure.

Telkom has asked the government, its largest shareholder
with a 39.8 percent stake, to approve the sale of part of the
company as it seeks to expand into broadband and mobile markets.
The government blocked the sale of a 20 percent stake to South
Korea’s KT Corp. (030200) this year, saying it was a strategic asset to
South Africa.

“She’s definitely highly regarded in the telecommunication
industry,” Rudi van der Merwe, head of stockbroking at Standard
Bank Group Ltd., said of Moholi by phone from Johannesburg.
“The government’s shareholding and influence creates a lot of
uncertainty at Telkom.”

‘Losing value’

It is critical that stability is established at the
executive and board levels as the entity has been losing value
over an extended period of time, the country’s Public Investment
Corp., which manages the pensions of government workers, said in
an e-mailed statement today. The PIC owns 10.6 percent of
Telkom’s issued stock, according to data compiled by Bloomberg.

Telkom will start the search for a new CEO once it fills
other spaces on its board, which needs at least eight members.
Moholi’s planned exit follows that of Chairman Lazarus Zim, who
stepped down after the group’s annual meeting last month. Non-
Executive Director Neo Phakama Dongwana also left the board as
of Nov. 2 after holding the position for nine months, the
company said.

Telkom said on Oct. 24 that it had appealed to the South
African government to allow it to sell a stake and is now
waiting for a response.